Summary of Telephone and Data Systems (TDS) Conference Call Company and Industry Overview - **Company**: Telephone and Data Systems (TDS) and its subsidiary Array Digital Infrastructure - **Industry**: Telecommunications, specifically focusing on fiber and tower operations Key Points and Arguments TDS and Array Digital Infrastructure - The deal with T-Mobile to sell wireless operations closed on August 1, 2025, marking a significant transition for TDS and Array [2][3] - Array now operates as a separate entity, owning 4,400 towers, making it the fifth largest tower company in the U.S. [4] Spectrum Sales and Financial Outlook - TDS is pursuing pending spectrum sales worth $1 billion each with AT&T and Verizon, expecting regulatory approval soon [5][14] - The company has sold 70% of its spectrum and has remaining C band spectrum, which has no build requirements until 2029 [6][16] - Anticipation of special dividends from the proceeds of spectrum sales, with the AT&T deal expected to close by the end of 2025 [14][15] Colocation Growth - Colocation revenues grew by 12% in Q2 2025, with a significant increase in application fees contributing to this growth [7] - T-Mobile has committed to 2,015 colocations, which is expected to increase cash revenues by approximately 50% [8] Fiber Expansion Strategy - TDS aims to double its fiber footprint from 900,000 to 1,800,000 addresses over the next five years, having surpassed 1 million fiber addresses recently [12][13] - The company is focused on two major build programs: expansion into new communities and converting existing copper addresses to fiber [35][36] Financial Management and Capital Return - TDS has a leverage ratio target of 3x, providing flexibility for future growth [24] - Plans for special dividends following spectrum sales, with expectations for a regular recurring dividend by late 2026 or early 2027 [28] Market Position and Competitive Landscape - The company does not view fixed wireless or satellite-based broadband (e.g., Starlink) as significant threats to its fiber business [46][78] - Increased competition from overbuilders in cable markets is noted, but TDS remains confident in its competitive product offerings [73][75] Operational Improvements and AI Utilization - TDS is implementing operational improvements and utilizing AI to enhance efficiency and customer experience [66][67] - The company is focused on streamlining back-office operations and enhancing customer service through technology [64] Customer Behavior and Economic Impact - No significant changes in customer payment behavior or churn rates have been observed due to macroeconomic conditions [71] - The company remains optimistic about its product demand, which is considered recession-resistant [71] Future Plans and Investor Relations - TDS plans to provide clearer disclosures regarding its tower business and fiber operations in upcoming earnings calls [83][84] - The company is evaluating additional opportunities for growth, including potential M&A, while maintaining financial discipline [37][62] Additional Important Content - The company is focused on enhancing its fiber network efficiency, which is expected to improve margins over time [63] - TDS is committed to maintaining a strong balance sheet, having paid off most of its debt post-deal [57][58] - The management team is in place, with a focus on operational success and strategic growth [32]

Financial Data and Key Metrics Changes - The company reported a solid second quarter with a 4.7% organic growth, excluding the impact of Sprint cancellations, and a $6 million year-over-year increase in services activity contribution [12][13] - Adjusted EBITDA and AFFO are expected to increase by $25 million and $35 million respectively in the updated outlook for full year 2025 [12][13] - A $10 million reduction in SG&A was noted, primarily due to staffing reductions and office closures [12][13] Business Line Data and Key Metrics Changes - The increase in site rental revenues by $10 million is attributed to higher organic contributions driven by increased activity levels [12][13] - The services gross margin improved due to higher activity levels, contributing to the overall positive performance [12][13] Market Data and Key Metrics Changes - The company is experiencing higher leasing activity across all customers, driven by subscriber growth and increased churn, indicating a need for network capacity augmentation [19][20] - The outlook for organic growth in site rental revenues has been adjusted to 4.7%, reflecting improved operational efficiency and demand [12][13] Company Strategy and Development Direction - The company is focused on maximizing shareholder value as a standalone tower operator following the sale of its small cell and fiber solutions businesses [6][8] - A capital allocation framework has been implemented, which includes a reduced dividend to increase financial flexibility and plans for share repurchases post-transaction [9][10] - The company aims to enhance operational efficiency and customer service through investments in technology and systems [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or exceeding financial and operational objectives for 2025, with expectations of closing the sale transaction in the first half of 2026 [7][10] - The company anticipates continued investment in wireless infrastructure to meet growing data demands, despite a focus on fiber investments by carriers [102] Other Important Information - The company is actively engaged with regulatory bodies to facilitate the sale transaction and has begun receiving state-level approvals [7][10] - The board is in the process of searching for a new CEO, aiming to finalize this before the deal closes to reduce uncertainty [50] Q&A Session Summary Question: What is driving the higher leasing activity? - Management indicated that the higher leasing activity is due to increased subscriber growth and churn, necessitating network capacity augmentation [19][20] Question: How does the five G deployment timeline compare to previous cycles? - Management noted that the five G cycle may be longer than previous cycles due to the growing demand for data, which requires ongoing network enhancements [20] Question: What are the expected efficiencies post-divestiture? - Management expects to reach an annualized AFFO of around $2.3 billion to $2.4 billion post-transaction, with ongoing efforts to identify further efficiencies [24][27] Question: How are overlapping costs being evaluated post-divestiture? - Management stated that while there are some shared costs, the simplification of operations will help drive efficiencies over time [32][34] Question: What is the impact of recent tax reforms on carrier investments? - Management noted that while carriers plan to invest tax savings into their networks, most of this is directed towards fiber rather than wireless [102]